Book Details

About This Book

The complex models are explained step-by-step along with a flow chart of every implementation

Illustrates each asset class with fully solved C++ examples, both basic and advanced, that support and complement the text

Who This Book Is For

If you are a quantitative analyst, risk manager, actuary, or a professional working in the field of quantitative finance and want a quick hands-on introduction to the pricing of financial derivatives, this book is ideal for you. You should be familiar with the basic programming concepts and C++ programming language. You should also be acquainted with calculus of undergraduate level.

Table of Contents

Chapter 1: What is Quantitative Finance?

Discipline 1 – finance (financial derivatives)

Discipline 2 – mathematics

Discipline 3 – informatics (C++ programming)

The Bento Box template

Summary

Chapter 2: Mathematical Models

Equity

Foreign exchange

Interest rates

Credit

Summary

Chapter 3: Numerical Methods

The Monte Carlo simulation method

The Binomial Trees method

The Finite Difference method

Summary

Chapter 4: Equity Derivatives in C++

Basic example – European Call

Advanced example – equity basket

Summary

Chapter 5: Foreign Exchange Derivatives with C++

Basic example – European FX Call (FX1)

Advanced example – FX barrier option (FX2)

Summary

Chapter 6: Interest Rate Derivatives with C++

Basic example – plain vanilla IRS (IR1)

Advanced example – IRS with Cap (IR2)

Summary

Chapter 7: Credit Derivatives with C++

Basic example – bankruptcy (CR1)

Advanced example – CDS (CR2)

Summary

What You Will Learn

Solve complex pricing problems in financial derivatives using a structured approach with the Bento Box template

In Detail

This book will introduce you to the key mathematical models used to price financial derivatives, as well as the implementation of main numerical models used to solve them. In particular, equity, currency, interest rates, and credit derivatives are discussed. In the first part of the book, the main mathematical models used in the world of financial derivatives are discussed. Next, the numerical methods used to solve the mathematical models are presented. Finally, both the mathematical models and the numerical methods are used to solve some concrete problems in equity, forex, interest rate, and credit derivatives.

The models used include the Black-Scholes and Garman-Kohlhagen models, the LIBOR market model, structural and intensity credit models. The numerical methods described are Monte Carlo simulation (for single and multiple assets), Binomial Trees, and Finite Difference Methods. You will find implementation of concrete problems including European Call, Equity Basket, Currency European Call, FX Barrier Option, Interest Rate Swap, Bankruptcy, and Credit Default Swap in C++.

Authors

Alonso Peña, Ph.D.

Alonso Peña, Ph.D. is an SDA Professor at the SDA Bocconi School of Management in Milan. He has worked as a quantitative analyst in the structured products group for Thomson Reuters Risk and for Unicredit Group in London and Milan. He holds a Ph.D. degree from the University of Cambridge on Finite Element Analysis and the Certificate in Quantitative Finance (CQF) from 7city Learning, the U.K. He has lectured and supervised graduate and post-graduate students from the universities of Oxford, Cambridge, Bocconi, Bergamo, Pavia, Castellanza, and the Politecnico di Milano. His area of expertise is the pricing of financial derivatives, in particular, structured products.

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